Times are tough for the Edinburgh film festival. I haven't been in the city more than an hour before a senior film executive – who did not want to be named – tells me this year's is a "disaster".

It's not that there's anything wrong with the films themselves. I went to screenings of David Hare's elegant spy drama Page Eight; James "Man on Wire" Marsh's heartrending chimp doc Project Nim; a Studio Ghibli reworking of The Borrowers called Arrietty; and Béla Tarr's austere fable The Turin Horse. But media coverage, particularly in Scotland, has been largely negative.

Examples? The opening screening of John Michael McDonagh's The Guard – normally a red-carpet sellout – was only two-thirds full and suffered a projector breakdown. Compared to last year, about half the number of films have been programmed; in an embarrassing blunder, one of them, Lucy Walker's estimable Countdown to Zero was included in this year's lineup, despite already having shown last year. There have been baffling omissions, too: where was Lynne Ramsay's We Need to Talk About Kevin? Why was a print of Terrence Malick's Tree of Life in the city for a press screening, but not for the festival? High-profile industry figures are absent, even the celebrities curating some of the programme. Only one, Hungarian director Béla Tarr, turned up – presumably because he is promoting his own film. Attendances, too, seem to be down: it's too early for this year's figures, but in 2010 the Edinburgh Festivals Impact Study recorded 44,456 admissions – a drop of 18% compared to 54,500 in 2004.

Why does a venerated, longstanding event appear to be in such freefall? Can it be right, as incoming director James Mullighan asserts, that it is "neither able nor willing to compete with Berlin, Cannes, Toronto and Venice"? Is this simply a lack of ambition? All the other Edinburgh festivals are, to some degree, world-renowned events; how come film has dropped the baton?

Critics have focused on the chaotic process of recruiting a new director after Hannah McGill stepped down. There's no doubt the festival was under threat: its finances looked shaky as a three-year grant from the now-defunct UK Film Council came to an end; other younger festivals, including the nearby Glasgow film festival, were threatening to eclipse it; and, since its move from September to June, it is having trouble attracting major names to pitch up for promotional duties.

The festival's controlling organisation, Centre for the Moving Image, announced the appointment last year of Mark Cousins and Tilda Swinton as creative advisers – to try to infuse the spirit of their 2008 Ballerina Ballroom event in Nairn. But six months later, the pair had backed away, with Swinton feeling aggrieved enough to release a statement on the temporary nature of her and Cousins's involvement.

The subsequent uncertainty didn't help. Nick James, editor of Sight & Sound magazine, sums it up. "Even a couple of months ago, we had no clear idea what was happening. Their press releases were tantalising, but nothing seemed to solidify. A lot of elements that worked well in the past appear to have vanished." A glance through the programme would seem to bear this out. A few of Cousins's and Swinton's ideas have survived: the guest curators were their idea, and the awards have been ditched.

It would be wrong to be too hard on this year's edition. Everyone agrees that the move to June three years ago has had an adverse effect: the city is a very different proposition outside the main festival season, without the buzz of the fringe. The Film Council grant, of £1.9m over three years, from 2007-10, was meant to help with this transition, but it clearly hasn't worked.

The festival will always have a committed audience, but its reach needs to be wider if it is to become a major event. Right now, a lot of people don't seem motivated to make the trip. "The problem," says James, "is that, with the massive global expansion of film festivals over the last decade, there just isn't enough cinema to go round."

No one wants to see Edinburgh go down. Festival insiders assure me that the organisers are already taking corrective steps; admitting defeat and shifting it back to August must surely be the first order of business. Then, they programme a significant amount of quality, attention-grabbing cinema. James agrees: "To divorce the film festival from the rest of the Edinburgh festivals is to miss the point. It should then be underpinned by a love of world cinema – not just promoting young British talent. What it needs to do is get back in touch with cinephilia."